What Health Reform Means for Long-Term Care

I bought long-term-care insurance a few years ago. In light of health-care reform, should I keep my policy?

Don’t drop your long-term-care policy, especially if you’ve been paying premiums for several years. The national, voluntary long-term-care program included in the health-care reform law will provide some money to help cover long-term-care expenses. But it offers much less coverage than the average cost of care and could leave you far short if you’re depending on it to pay your long-term-care bills.

Starting next year, employees of companies that choose to participate will be automatically enrolled in the Community Living Assistance Services and Supports (CLASS) Act and will pay for it through payroll deductions, unless they opt out. Other workers and the self-employed will be able to enroll on their own. Retirees are not eligible to sign up.

After paying premiums for five years (and you must have worked for three of those five years), you’re eligible for a cash benefit of about $50 per day if you’re unable to perform two or three activities of daily living, such as walking, bathing or dressing, or if you are cognitively impaired. (The U.S. Department of Health and Human Services is still working out the details.)

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That benefit could help a bit, but it falls far short of covering the actual cost of long-term care -- which currently averages $219 per day in a nursing home, or $168 for eight hours of care by a home health aide.

The Department of Health and Human Services hasn’t set the premiums yet, but the American Academy of Actuaries estimates that they could average as much as $125 to $160 per month (or as little as $5 per month for those below the poverty line).

The high-end estimate is about the same price that a relatively healthy fiftysomething would pay for a private long-term-care policy providing about three times that daily benefit for three years. (A study by actuarial consulting firm Milliman found that only 8% of long-term-care claimants who had policies with a three-year benefit period exhausted their benefits.)

A big plus of the CLASS Act is that you can’t be rejected for coverage because of your health, so it could help people with medical conditions who don’t qualify for private long-term-care insurance. And it does cover many services that aren’t eligible for benefits under most long-term-care plans, including homemaker services, home modifications and transportation, that could help you stay out of a nursing home.

For more information about private long-term-care insurance, including new strategies for lowering the premiums, see Long-Term Care You Can Afford.

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